Bankruptcy proceedings raising tension between Stockton, Ports

STOCKTON - Just eight years ago, the Stockton Ports minor league baseball team took the field for the first game ever played at the sparkling new Stockton Ballpark, built on the waterfront amid sweeping plans to transform the city's downtown.

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By Scott Smith

recordnet.com

By Scott Smith

Posted Sep. 15, 2013 at 12:01 AM
Updated Sep 15, 2013 at 10:33 AM

By Scott Smith

Posted Sep. 15, 2013 at 12:01 AM
Updated Sep 15, 2013 at 10:33 AM

» Social News

STOCKTON - Just eight years ago, the Stockton Ports minor league baseball team took the field for the first game ever played at the sparkling new Stockton Ballpark, built on the waterfront amid sweeping plans to transform the city's downtown.

A sold-out crowd of 5,200 roared when the team's pitcher, Jason Windsor, threw the first pitch - a burning fastball for a strike. It was April 28, 2005, and the Ports beat the San Jose Giants 7-4. The fans and players alike felt unstoppable.

So much has changed.

The city today is bankrupt, and tense backroom talks aimed at getting more money from 7th Inning Stretch LLP, the Ports' ownership, have spilled out into the public, revealing a feud.

Ports' president and part owner Pat Filippone says his team has held its end of a long-standing agreement with the city and will continue to be a good partner.

But rather than asking him for more money, the city could do a lot to help itself, such as selling the ballpark's naming rights and booking events on non-game days.

"It's frustrating," Filippone said. "We've honored every aspect of the contract and will continue to do so."

Deputy City Manager Laurie Montes countered, saying that in bankruptcy she's had to have a lot of painful conversations with bondholders and the city's retirees. The Ports aren't exempt, she said.

"They're a great amenity in the city," she said. "The city needs to make changes to put us on sound financial footing."

The dispute stems from a 25-year contract Stockton and the Ports signed in 2004. The Ports paid $1.2 million up front, an average of $48,000 a year, for use of the ballpark. Under the deal, the team has two seven-year options that would extend the agreement an additional 14 years, making it a nearly four-decades long contract.

The team also pays $1.25 for every ticket sold and half of the revenue from suites. Citing confidential mediation, Filippone declined to reveal those totals, but he called it a "solid six-figure number."

For its part, the city this year paid $445,670 to SMG, Stockton's entertainment management firm, to mow the grass and maintain the ballpark. The city paid an additional $65,000 in property taxes for the publicly owned ballpark used by the Ports, a privately held firm.

These terms are likely to change, but it's not going to be easy.

The city also is in ongoing mediation with Brad Rowbotham, owner of Thunder, Stockton's minor league hockey team, which calls the Stockton Arena home in the same waterfront sporting complex. The city this year paid SMG $1.3 million for arena upkeep.

"We're going through things with the city," said Rowbotham, who declined to speak further in light of the confidentiality agreement. "We're making progress."

Mediation with its creditors and sporting teams began shortly after the city filed Chapter 9 protection June 28, 2012. In coming weeks, the city is expected to reveal its plan for exiting bankruptcy.

Strain between the city and Ports became public recently, when the city turned to U.S. Bankruptcy Judge Christopher Klein, seeking the court's subpoena power to obtain the team's business records.

Klein on Thursday granted the order requiring Filippone to comply within 30 days. The Ports say they will likely fight it.

Filippone maintains city officials don't have a right to the records and that the city is overreaching in an aggressive and threatening maneuver.

The city has never given him annual financial reports that are required each January under terms of the contract and outline how Stockton uses money the Ports pay into a "ballpark fund," he said.

"They need to understand the figures of the city before they try to get into the finances of a private business," said Filippone, adding that the Ports have never made a late payment to Stockton.

The city also hasn't taken advantage of other untapped streams of revenue from the ballpark, Filippone said. Stockton and SMG have never sold the naming rights, and the ballpark on non-game days sits empty. SMG in three years booked one event, he said.

Filippone refuted the city's claim that the money paid to SMG for the ballpark upkeep amounts to any kind of subsidy to the Ports.

"The bottom line is they never showed us the numbers," he said. "I don't know if they have the numbers. I tend to doubt they're spending that much on the facility."

Montes pushed back. The Ports exclusively use the ballpark, so the team directly benefits from Stockton's annual subsidy totaling more than $500,000, she said.

The contract Filippone refers to is years old, Montes said, and the health of the city was much different when leaders and the team signed it. Stockton is a poor community, she said.

"The taxpayers are footing this bill," Montes said. "Unfortunately, we are in bankruptcy. We're asking everyone to renegotiate their contracts with the city, even the Asparagus Festival."

On Friday, festival organizers and city officials announced they had reached an agreement to keep the community event downtown.

Montes agreed that the city could sell the naming rights of the ballpark. That was attempted in the past, and then the recession hit. The city and SMG will try again soon, but that money won't likely be enough to save the city, she said.

Montes also noted that Filippone's colleague and the Ports' majority owner, Tom Volpe, is a wealthy venture capitalist who recently moved back to California from Dubai.

"Stockton doesn't have the same kind of means as Tom Volpe," Montes said.

Filippone called that line of reasoning "complete garbage" and warned that future investors will hear such comments from City Hall and think twice before coming to Stockton.

Despite the wrangling, the Ports will likely stay put, said Peter Schroeder, chair of University of Pacific's Department of Health, Exercise and Sport Sciences.

The Ports, which ended its season on Labor Day with an 11-0 shutout loss to the Modesto Nuts at that team's John Thurman Field, would be hard pressed to find a better home turf than Stockton Ballpark, Schroeder said.

He said the Ports should open up their books or risk being accused of hiding something. The city, too, could put in a better effort at selling the naming rights, he said.

Stockton Ballpark nor Stockton Arena are high-profile venues that appear on TV and are able to fetch multimillion dollar deals like, say, the 49ers' Levi's Stadium in Santa Clara. But anything would help, Schroeder said.

"They have a good deal right now," Schroeder said of the Ports. He speculated they were profitable. "And that's why they don't want to show the books."